We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell Cincinnati Financial Corporation (NASDAQ:CINF), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
The Last 12 Months Of Insider Transactions At Cincinnati Financial
Notably, that recent purchase by Thomas Aaron is the biggest insider purchase of Cincinnati Financial shares that we've seen in the last year. That means that even when the share price was higher than US$90.70 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
Over the last year, we can see that insiders have bought 1.83k shares worth US$185k. But they sold 785 shares for US$90k. In total, Cincinnati Financial insiders bought more than they sold over the last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Cincinnati Financial is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at Cincinnati Financial Have Bought Stock Recently
Over the last three months, we've seen a bit of insider buying at Cincinnati Financial. In total, insiders bought US$125k worth of shares in that time. But insider Donald Doyle sold US$90k worth. It is good to see that insiders have been buying, but they did not buy very many shares, in the scheme of things.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It's great to see that Cincinnati Financial insiders own 2.4% of the company, worth about US$353m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Cincinnati Financial Tell Us?
Our data shows a little insider buying, but no selling, in the last three months. That said, the purchases were not large. But insiders have shown more of an appetite for the stock, over the last year. Judging from their transactions, and high insider ownership, Cincinnati Financial insiders feel good about the company's future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. When we did our research, we found 2 warning signs for Cincinnati Financial (1 is a bit unpleasant!) that we believe deserve your full attention.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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